TAX NEWS - June 2010

UK Tax: Clamping down on tax avoidance might be the wrong approach, warn experts

UK government should simplify the tax system instead of chasing cash through toughening up the tax avoidance schemes, experts have claimed.

Sue Moore, associate director of Milton Keynes-based Baker Tilly International, made the suggestion as the government announced plans to launch a consultation over the summer to gauge whether inheritance tax should be added to the Disclosure of Tax Avoidance scheme.

Speaking after the Emergency Budget, she said: "The government is taking the 'sledge hammer to crack a nut' approach. It wants to catch all the income that has been lost through people finding loopholes in the tax system.

"But the government should just simplify the tax system instead of adding IHT to the disclosure of tax avoidance scheme. What we must remember is that tax avoidance is legal. If there are loopholes in the law and people can find them, then that is perfectly legal. It would be better just to simplify the system so there are no gaps in the law in the first place."

The government also announced plans to examine further changes to rules on stamp duty tax on high-value property transactions to prevent people avoiding playing tax in this area.

Ray Boulger, senior technical manager of London-based John Charcol, said: "Having a closer look at stamp duty tax will be a positive step. It has been unfair that some people have been able to avoid paying full stamp duty because they were able to buy a high-value property and able to pay for tax advice, which allowed them to reduce the amount of stamp duty they paid."